Despite the intense completion in the OTT space, online video company Vuclip feels that it has got its business model right, which will enable it to outlast many of its contemporaries. The company, which founder Nickhil Jakatdar describes as a “technology-led media company”, has around 4.5 million active users just in India and is present in more than 20 countries worldwide. By 2020, the company wants to reach 100 million monthly active users across all its markets. Ambitious goals indeed, but then no one has ever blamed Jakatdar of lacking in ambition.
Genesis of Vuclip
“Before that (Vuclip) all my start-ups were in the enterprise space. I wanted to do something in the consumer space. One thing I was very intrigued with was in 2006 YouTube had been acquired by Google and it was doing very well. But the primary consumption of YouTube was on desktop. We thought that it was only a matter of time when this kind of consumption will happen even in emerging markets like India but in this case the consumption will happen on mobile and not desktop,” explains Jakatdar.
The challenge before the team was to create a mobile experience on the mobile, knowing the challenges around streaming video on the mobile like lack of great devices and networks, high cost of data, etc.
“It has been a great journey with a lot of learnings. One thing that we know is that our DNA is technology. We are all technologists and we tried to solve the hard technology challenges like how to deliver video even when the bandwidth is not that great. Over time we have had to keep changing the problem statement because the technical challenges have changed. How do you deliver a great video quality not having the size of the data piles too big, otherwise you will have to start buying multiple data plans. So we are still working on solving these. Additionally, part of the journey has also been about how to get the content right,” he reminisces.
One learning about content, says Jakatdar, is that it is important to not rely on intuition but go by data available. “If you create content thinking this will work or this will not work, you will be surprised,” he says.
“Consumers expect (the providers) to get the technology right but it is the content that they actually look for,” notes Jakatdar. He admits that Vuclip might not be the most creative (They are technologists, he reiterates.), but he points out that there are enough creative people in the industry. “We wanted to understand the insights behind our consumer base. We started putting data scientists behind the problem and looking at what time of content works. The answer was very different from country to country,” said Jakatdar. For example, he pointed out that the Indian market is akin to 25 separate countries itself. “We come up with locally relevant content by looking at the data and deciding what is relevant in the market. We not only license content but also create our own original content for the market,” he informed us.
The last learning for the Vuclip team, in their 10 year journey, has been about getting the business model right. “In a market like India, advertising is just starting to pick up. The conventional wisdom is that consumers do not like to pay, which is true but it is a lot more surmountable if you make the prize point something that they care about and as importantly if you figure out if you get them to pay through something that they are already comfortable with. So, it is important to understand the right business model in each market,” said Jakatdar.
Partnership With PCCW
Originally banking on investments from a group of Silicon Valley investors (The company still has its HQ in Silicon Valley), around 2015, the Vuclip management had a change of heart.
Says Jakatdar, “We realized that since most of our business is in this region (Asia) and we have transitioned to become more of a media company, we needed to find investors who had understood this market and understood media.”
With interest from a number of investors, why PCCW?
The first reason, says Jakatdar, was that PCCW was the biggest paid TV operator in Hong Kong. The second; even PCCW had ambitions to move out of Hong Kong, which happily coincided with Vuclip’s plans for the region.
“The third reason was that they had the mindset of an entrepreneur. Eight years before the deal, PCCW was new to the pay TV business and was the No. 4 player and now they were No. 1. So they knew how to disrupt the market and they also understood the potential of getting disrupted by a new entrant in the market. This was a mindset that I personally was looking for because I wanted people who had the drive. Plus, Richard Li, the Chairman at PCCW, was the founder of Star TV. So, he is familiar with the much bigger media play and his ambitions match ours. Now, I don’t have to deal with too many investors because again that can slow you down,” he said.
India’s place in Vuclip’s Global Ambitions
Vuclip has been aggressively launching new content properties in the Indian market over the last few months. In the last three months, Vuclip has launched eight original content properties, including four in Telugu and four in Hindi (two of which have been directed by Vikram Bhatt) on Viu, it’s online video platform. The company has also signed up eight new content series.
“We have always had ambitions of being a global company,” says Jakatdar. “You need to build scale in the media space because your investments are being made into making original content so the bigger base you have to spread it across and monetize it; the better,” he added, further stating that India is a huge market and one worth investing in as a stand-alone market. “But we also have 20 other markets where we will keep investing though at a higher level we will keep investing in India,” he noted.
He agreed that the Indian market is super competitive. “Everyone and their brother is in the OTT space (in India),” he quips.
Then what differentiates Vuclip? “If I remove my Vuclip hat and put on my consumer hat, the No. 1 thing I ask myself is; why should I download an app. It has to play a certain role in my life for me to download it and keep it. As a consumer I am not going to download and keep 30 apps. I might download 5 or 10 and then uninstall them. But, which one will I download and keep? For this the consumer needs to have a very clear idea about the value of the app,” explained Jakatdar.
He gives the example of Netflix, which he says has a very clear value proposition, namely, English language originals. “I will go to another app because it is the best cricket app. I will go to one app because it gives me the best Bollywood content. So why should people come to Vuclip? We have not spent money on TV advertising but what we have done is created these niches in people’s minds about the value that Vuclip provides. We don’t want to be everything to everybody but we want people to know what we are good at,” he said, adding that Vuclip wants to be the go-to app for locally relevant content.
“In the month of May, we drove north of a billion minutes in consumption,” he added proudly.
OTT: A Long Game
When asked why the company has not spent on advertising so far, especially considering how every other OTT player is spending aggressively to promote their platforms, Jakatdar remains nonchalant.
Does this not put Vuclip in a competitive disadvantage? He does not seem to believe that is the case.
“Our belief is that spend money on brand advertising like TV once you have the unit economics right; once you have a basic model working where consumers are already coming, they are watching and now you want to scale this working model,” he said, while adding that the company will engage in marketing campaigns in the coming months.
“What we find in many markets, including India, especially in this space, is that a lot of people start with TV advertising and then to try to build their value proposition,” he added. Taking the example of Netflix, he pointed out that the platform had built its value proposition long back so it was not a worry for them (Netflix).
Speaking about subscription, he said that India would slowly come around to a subscription model but that would not happen as long as there are players who will offer content for free.
“We believe in a freemium model where certain amount of content is available for free while other content is behind a subscription paywall. In India, too, we believe that there will be a balance between freemium and subscription but if someone is going to provide content for free then no other model is going to work. Then again, how long can this (providing free content) going to work? We are already seeing some players re-evaluating their business model. Our view is that this is a long game and we have to stay true to the basics and get our value proposition right. There are some people spending a lot of brand dollars but these might not be around in six months or an year. On the other hand, there are some players who are spending less but spending it very wisely. My view is that in three years there will be only 5 players who will be concentrating in very specific niches,” says Jakatdar.